India Imposes Penalty Of One Million Euro For Offsets Delay In Rafale Aircraft Deal
December 24, 2021 admn2017
22 Dec 2021
India Received The First Batch Of Five Rafale Jets, Manufactured By French Aerospace Major Dassault Aviation, On July 29, 2020
India has imposed a penalty on European missile maker MBDA for delay in fulfilling offsets commitments in the Rafale aircraft deal signed between India and France to procure 36 aircraft at a cost of Rs 59,000 crore.
The penalty has been “imposed and collected” from
MBDA under the overall new policy to tighten the screws on defaulting armament majors, reported The Times of India citing top defence sources. MBDA is a weapons package supplier for the Rafale jets manufactured by Dassault Aviation in the inter-governmental agreement inked by India in September 2016, it said.
According to the report, besides the inter-governmental agreement with France and supply protocols for the fighters and weapons, India had signed a major offsets contract with Dassault
and a smaller one with MBDA. As part of the agreement, half of the contract value (around Rs 30,000 crore) has to be ploughed back to India as offsets or re-investments, the report suggested.
Under the deal, the offsets are spread over seven years from the date of signing the contract, with
no discharge in the first three years.
“The fine has been imposed on MBDA after it slipped in discharging its offsets obligations for the first applicable year from September 2019-September 2020,” said the report quoting a source.
The fine imposed on MBDA is reportedly
5 percent of the shortfall in the discharge of offsets in a particular year, which means it is less than 1 million euro.
“With the shortfall being carried over to the second year, the case will be examined again,” the source told the publication.
The MBDA has paid the penalty but also lodged a protest with the Ministry of Defence, the report added.
India received the first batch of five Rafale jets, manufactured by French aerospace major Dassault Aviation, on July 29, 2020. The Rafale jets are India’s first major acquisition of fighter planes in 23 years after the Sukhoi jets were imported from Russia.
The multi-role Rafale jets are known for air superiority and precision strikes. They are capable of carrying a range of potent weapons. MBDA’s Meteor beyond visual range air-to-air missile and Scalp cruise missile are the mainstay of the weapons package of the Rafale jets. Meteor is a next-generation beyond visual range air-to-air missile (BVRAAM) designed to revolutionise air-to-air combat.
The problem was that the Indians confused the dates of the Dassault contract with the dates of the MBDA contract, which was signed later. MBDA paid to show its goodwill, but protested with solid arguments that led to an amicable settlement. In any case, in the first year offset obligations are low and 5% of a small sum is a very small sum, well under €1 million.
Deepak Sangha, a former executive with MBDA’s British arm, said:
India’s approach to offsets does not economically benefit the nation and its defense industry in the long run.
Sangha said:
OEMs face a lack of government flexibility when seeking minor deviations from stated or perceived guidelines. Moreover, penalties harm their reputations and could negatively impact opportunities elsewhere,
he added.
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